At the end of 2018, Estonia is one of the most favorable jurisdictions for cryptocurrency projects. Since 2017, the cryptocurrency business has been legalized here, the rules for conducting ICOs are clearly established, the rules for accepting cryptocurrencies as payment for goods and services are regulated.
Cryptocurrency is referred to as alternative means of payment, their sale and exchange for fiat money are allowed, and service of crypto wallet by specialized companies is allowed.
At the same time, operations with cryptocurrencies require the use of identification procedures (KYC). For specialized companies whose activities are related to alternative means of payment, mandatory registration is provided in the Register of Economic Activities. In addition, a special license is required.
Estonia has a favorable tax system for cryptocurrency projects. Income tax, including cryptocurrency activity, in Estonia, is 0% (if the profit is not withdrawn outside Estonia), but in the case of profit distribution, the rate of 14/20% is applied. Profit may also be subject to social tax. The VAT on cryptocurrency activity is not paid. A convenient e-residency system allows you to manage a company remotely.
By the way, Estonia is the first state in the world that offers electronic residency. An electronic resident is a foreigner who, on the basis of the identity of the state of his nationality, Estonia has provided an opportunity to create an electronic digital identity and has issued an electronic digital identity card.
In 2017, Estonia became one of the most frequently used jurisdictions for registering cryptocurrency companies and conducting ІСО. Before that, she was not particularly popular, although since 2015 the Forecast Foundation OÜ (creators of Augur) has been incorporated in the country.
As of July 2017, Estonia as the jurisdiction for conducting ISO has been selected by at least five startups, who in total have raised more than 77 million dollars. At the same time, the minimum amount of funds collected by each individual company was at least 4 million (data as of August 2017).
Estonian authorities have even announced plans to create their own cryptocurrency. Estonian online residency program manager e-Residency Kaspar Korjus said that the Estcoin government token could still see the light
“Our goal is to make Estonia the best option in the world for a reliable ICO. This can be achieved through the joint work of the public and private sectors in the development of our advantages, in particular in the area of business transparency and the e-Residency program. ”
In Estonia, you can create a company online in 15 minutes, and pay taxes in 3 minutes. Income tax on saved and reinvested profits is 0%, 95% of tax returns are filed online.
Estonia ranks first in the International Tax Competitiveness Index Rankings, second in the Index of Economic Freedom in Europe. The country has entered into investment protection agreements with 31 countries, including the United States, Germany, France, Finland, Sweden, Norway, and Switzerland, as well as double tax treaties with 53 countries. All foreign investors can set up companies and conduct business in Estonia under the same conditions as local investors.
As noted in the report of the US Congress on the regulation of cryptocurrency in different countries of the world, on November 27, 2017, Estonia adopted amendments to the legislation on combating money laundering of criminal proceeds. There, a cryptocurrency (virtual currency) is defined as a value in digital form that can be transferred, stored or exchanged, and which individuals or legal entities accept as a means of payment. However, it is not a legal currency of any state or fund (banknote or coin, non-cash funds in bank accounts or electronic money).
Anti-laundering legislation also extends to providers that provide cryptocurrency exchange for fiat money or provide users with services related to virtual currency wallets, which include generating personal keys for users or storing them for the subsequent use of these keys for storing or transferring virtual currencies. Such providers must obtain the appropriate license.
In general, by the end of 2018, Estonia can be assessed as one of the friendliest jurisdictions, in which legislation is actively developed aimed at creating favorable conditions for the creation and operation of cryptocurrency projects.
Over time, Estonia’s attitude to cryptocurrencies changed. Being wary of an unfamiliar settlement system in 2015 and urging citizens not to keep Bitcoin savings, the Central Bank of Estonia compared the new currency with the financial pyramid.
However, with the adoption of the Law on Counteracting the Legalization of Illegally Received Incomes and the Financing of Terrorism (Money Laundering and Terrorist Financing Prevention Act 2017 MLTFPA 2017), the attitude of the state has warmed.
In Estonia, cryptocurrencies are considered to be an alternative means of payment, that is, an unconventional financial instrument that has a monetary value and is located outside the normal banking system. This concept is related to the fact that, in accordance with the Law on Payment Institutions and Institutions Related to Electronic Money (Payment Institutions and E-Money Institutions Act further – PIEIA), cryptocurrencies cannot be considered electronic money, since they are not issued by a specific issuer. Also, cryptocurrencies are not considered by Estonian law enforcers as securities or debentures.
The license and supervision of this activity are provided by the Estonian Financial Intelligence Unit (FIU), an independent unit of the Estonian Police and Border Guard.
To obtain a financial license, it is necessary to prepare a set of documents and submit them to the Financial Intelligence Unit of Estonia. If the board members, shareholders or beneficiaries of the company that submitted the application are non-residents of the Republic of Estonia, in addition to the main package, you must provide a certificate of no criminal record of such persons.
In addition, the company must develop and submit an internal document – the rules for internal control over compliance with the law on countering the laundering of money obtained by criminal means.